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These are real problems. However they are solved elegantly by central banking, and indeed that is what we have in the US: ACH and FedWire. Each bank holds an ac

These are real problems. However they are solved elegantly by central banking, and indeed that is what we have in the US: ACH and FedWire. Each bank holds an account with the Federal Reserve, and can make cheap instantaneous or free nightly batch transfers between its Fed account and other banks' Fed accounts. The strong central system extracting guarantees and ensuring minimal abuse is a major production, but we still use it for all electronic transfers. The problem is that many American banks also process their own transfers in a nightly batch on the same 60s mainframe application they've been using since mainframes were cool. First business night: money is taken out of your account. Second business night: money is moved between banks via the Fed. Third business night: money from the Fed is credited to recipient account. If both banks were to actually do online transaction processing (like MC/Visa) then you'd only wait for the Fed's nightly batch. Some institutions like Alliant Credit Union have the rare differentiator of actually transacting with you and the Fed on the same day, instead of in separate nightly batches. FedWire is actually instantaneous settlement, but the banks have all apparently conspired to charge an enormous markup on it. It doesn't help that cheap ubiquitous wires would outright destroy MC/Visa, who effectively get to tax all consumer spending by being the only system with live/online transaction processing for authorizations.

PeterisP 11y ago
The EU solution to a very similar problem that we had earlier was essentially a single item in legislation (the payment services directive) that states that if a consumers payment is not credited to the beneficiary within a specific time limit, then the consumer is entitled to compensation from their (sending) institution. The industry had a couple of years before it came into force, by that time everybody implemented it. I believe that a similar approach is the only way that can be effective in achieving a similar result in USA - unless some regulator draws a line and says "your product must meet a certain quality level or it's not fit to be sold" the current market has no reason to change, it's more profitable as it is now.
- mikaelm 11y ago
  Hey PeterisP, what does the EU payment servies directive specify as max send time and for what cases, can you give more exact reference? Thanks.
  - PeterisP 11y ago
    The key point for this is #69 of http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32007L0064 http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:320... stating that they must be credited to the beneficiary "at the latest by the end of the next business day". +1 business day if made in paper, and cut-off times apply - if you make an order at late evening, the bank can treat it as received in the following business day. "for what cases" is a bit tricky. It must apply to all intra-EU deals in EUR and for the EU countries that don't use EUR, their national transactions. But for other combinations of countries and currencies (e.g. to non-EU places like Switzerland, local transfers in USD, etc), it varies, and there's some room for interpretation by member states.
renaudg 11y ago
>It doesn't help that cheap ubiquitous wires would outright destroy MC/Visa, who effectively get to tax all consumer spending by being the only system with live/online transaction processing for authorizations. Cheap (actually: free) ubiquitous wires are a reality in the UK as described or in the Euro zone, and I think MC/Visa do just fine there.

PeterisP 11y ago

The EU solution to a very similar problem that we had earlier was essentially a single item in legislation (the payment services directive) that states that if a consumers payment is not credited to the beneficiary within a specific time limit, then the consumer is entitled to compensation from their (sending) institution. The industry had a couple of years before it came into force, by that time everybody implemented it. I believe that a similar approach is the only way that can be effective in achieving a similar result in USA - unless some regulator draws a line and says "your product must meet a certain quality level or it's not fit to be sold" the current market has no reason to change, it's more profitable as it is now.

mikaelm 11y ago
Hey PeterisP, what does the EU payment servies directive specify as max send time and for what cases, can you give more exact reference? Thanks.
- PeterisP 11y ago
  The key point for this is #69 of http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32007L0064 http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:320... stating that they must be credited to the beneficiary "at the latest by the end of the next business day". +1 business day if made in paper, and cut-off times apply - if you make an order at late evening, the bank can treat it as received in the following business day. "for what cases" is a bit tricky. It must apply to all intra-EU deals in EUR and for the EU countries that don't use EUR, their national transactions. But for other combinations of countries and currencies (e.g. to non-EU places like Switzerland, local transfers in USD, etc), it varies, and there's some room for interpretation by member states.

renaudg 11y ago

>It doesn't help that cheap ubiquitous wires would outright destroy MC/Visa, who effectively get to tax all consumer spending by being the only system with live/online transaction processing for authorizations. Cheap (actually: free) ubiquitous wires are a reality in the UK as described or in the Euro zone, and I think MC/Visa do just fine there.